EC 201- Midterm Exam Guide - Comprehensive Notes for the exam ( 13 pages long!)
Document Summary
You have to give something up for it, so the cost might be military spending. In economics, we call this opportunity cost: rational people think at the margin, sunk costs are sunk, meaning they are irrelevant to the present decision, marginal costs will often determine business decision making. Lecture #3: the market system, law of demand, and demand function (chapter 4) The market is an institutional arrangement by which buyers and sellers exchange goods and services. Prices are the signals that guide market behavior. There are two sides of the market. We need to understand both to understand the allocation of resources. Xd = f (px , pr , i , pe , number t) Pr = a vector of prices of related goods -e. g. complements and substitutes, say, pc and ps. Complements: you need product x to use product y. I = consumer incomes or wealth -i. e. most goods are either.
